Roof Leaker To Watch: Johnson Controls (JCI)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Johnson Controls ( JCI) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Johnson Controls as such a stock due to the following factors:

  • JCI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $181.0 million.
  • JCI has traded 2.4 million shares today.
  • JCI is trading at 1.69 times the normal volume for the stock at this time of day.
  • JCI crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on JCI:

Johnson Controls, Inc. operates as a diversified technology and industrial company worldwide. The stock currently has a dividend yield of 2.1%. JCI has a PE ratio of 23.4. Currently there are 7 analysts that rate Johnson Controls a buy, 1 analyst rates it a sell, and 10 rate it a hold.

The average volume for Johnson Controls has been 3.8 million shares per day over the past 30 days. Johnson Controls has a market cap of $33.0 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 1.42 and a short float of 1.4% with 2.54 days to cover. Shares are down 4.7% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Johnson Controls as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, increase in net income, revenue growth, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • JOHNSON CONTROLS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, JOHNSON CONTROLS INC increased its bottom line by earning $2.11 versus $1.57 in the prior year. This year, the market expects an improvement in earnings ($3.62 versus $2.11).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Auto Components industry. The net income increased by 194.3% when compared to the same quarter one year prior, rising from $105.00 million to $309.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 4.1%. Since the same quarter one year prior, revenues slightly increased by 2.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has slightly increased to $1,242.00 million or 9.62% when compared to the same quarter last year. Despite an increase in cash flow, JOHNSON CONTROLS INC's cash flow growth rate is still lower than the industry average growth rate of 22.20%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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